Shale Gas and the “Rebirth” of Texas Gulf Coast Refineries

July 2, 2012 | 7:00 AM

Along the Texas Gulf coast in cities where the skylines are formed by the stacks of refineries, they’re talking about a perfect storm headed their way. But this storm has nothing to do with the tropics and everything to do with natural gas.

“It’s almost a perfect storm of low energy costs, low financing costs, low construction costs,” said Bob Lieper, the city manager of Baytown.

Dave Fehling/StateImpact Texas

Bob Leiper

Add them all up and what do you have?

“We’re talking anywhere from 7,000 to 15,000 construction jobs, high-paying construction jobs. So that’s good for housing, that’s good for retail, that’s good for all the elements of Baytown,” said Leiper.

All Pipelines Lead to Baytown

Baytown sits on upper edge of Galveston Bay and is home to Exxon Mobil’s massive complex, once the nation’s biggest refinery but recently displaced by the newly-expanded Motiva refinery 70 miles to the east in Port Arthur. Not to be outdone, Exxon Mobil has its own plans to spend billions on its own expansion project. Ditto for Chevron Phillips which says it will spend $5 billion on its Baytown petrochemical plant.

At the heart of the building boom is cheap natural gas. Hydraulic fracturing has dramatically increased the amount of gas extracted from shale plays around Texas and nearby states with much of it sent in pipelines that come right through Baytown.

Dave Fehling/StateImpact Texas

B.J. Simon

“We have a true petrochemicals hub here,” said B.J. Simon, associate executive director of the Baytown/West Chambers County Economic Development Foundation.

“All pipelines lead to Baytown,” Simon said.

It’s keeping them busy at city hall where pipelines must get approval to cross through town.

“We would usually have one pipeline project (to approve) a year and we’ve had three in two weeks, ” said city manager Leiper.

Dave Fehling/StateImpact Texas

Chevron Phillips plant in Baytown

Re-birthers

The cheap gas can be used in a variety of processes to make petrochemicals and plastics and make them more cheaply than competitors overseas.

“This has led to a rebirth of the U.S. petrochemical industry,” said A.J. Teague, COO of Enterprise Products which last month announced its plans to build what it said would be one of the world’s biggest facilities to process “natural gas liquids” into propylene which is used in plastics.

Teague said in a company news release that the plentiful and cheap natural gas produced here has made the U.S. “one of the lowest cost producers” of the basic chemicals used to make plastics.

Dave Fehling/StateImpact Texas

Randall Martin is part of our AUDIO story

It’s a point repeated in Baytown.

“There was a time a decade ago when it was not uncommon to see petrochemicals, plastics, and polyethylene being produced in China and being shipped here to be used domestically. Well, that whole equation can be changed now,” said Simon with the economic development foundation.

More Plastic, More Pollution

In the past year, eight companies have applied to the Texas Commission on Environmental Quality (TCEQ) for pollution permits.The permits would be for 11 new or expanded petrochemical plants on the Gulf Coast.

The good news is that newer plants generally pollute less than even if they were built just a decade ago. But they will still mean more pollution and in the case of Baytown, that’s bad news because it and the surrounding counties are part of the U.S. Environmental Protection Agency’s Non-Attainment Areas for air pollution. Baytown straddles Chambers and Harris counties, both of which the EPA lists as “severe” for air pollution.

Dave Fehling/StateImpact Texas

Alex Cuclis

“They (the newer plants) will certainly emit less than if they were built ten years ago,” said Alex Cuclis, a former engineer at Shell’s Deer Park refinery, now an environmental scientist with the Houston Advanced Research Center.

“They’re still going to have some emissions that add to the total and all that has to be sorted out in the mix,” said Cuclis of the permit process that’ll involve both the TCEQ and US EPA.

State Aid

The state plays another role besides regulating the plants: it helps pay for some of them.

Companies including Citgo, Motiva and Huntsman have received a total of $11.4 million from the Texas Enterprise Fund for expanding plants or offices.

When a watchdog group, Texans for Public Justice, analyzed whether the public money actually promoted new jobs, it found the companies delivered largely as promised, especially compared to other industries.

“I don’t recall much criticism of oil and gas,” said Craig McDonald, the group’s executive director.

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Comments

With U.S. net petroleum imports down 15% year over year, this industrialization is a function of those petro-dollars staying home. Good stuff!

the mama

Sure, good stuff, unless you’re interested in breathing clean air.

http://www.facebook.com/neil.moyer1 Neil Moyer

Ethane associated with shale gas is the feed stock for many petrochemicals; Motiva Port Arthur expansion designed to process Saudi heavy crude; Shell Chemical looking to soak up associated ethane in PA with new chemical plant there…